Local Government Finance

Debate between Gareth Thomas and John Redwood

Wednesday 22nd February 2017 Commons Chamber

[Mr Thomas]

I certainly welcome small business rates relief. We will have to wait and see whether Ministers will raid the pot that some businesses were hoping to benefit from, in terms of that rates relief, to fund support to other businesses that will see even bigger increases than they were expecting in their business rates bills.

[John Redwood]

The hon. Gentleman is making a case for more funding for social care and more rates relief. How much money does he have in mind and how should that be paid for?

[Mr Thomas]

I am sorry that the right hon. Gentleman was not successful in his efforts to get on to the Local Government Finance Bill Committee, but if he will bear with me, I will to come on to Wokingham and social care.

--- Later in debate ---

[Mr Thomas]

I admire the hon. Gentleman’s chutzpah, if nothing else. On the subject of mates’ rates, I shall deal with Surrey County Council in a moment.

Just last month, the Secretary of State once again told the House:

“In the last spending review, the Government allocated an additional £3.5 billion a year by 2020 to adult social care.”—[Official Report, 16 January 2017; Vol. 619, c. 664.]

That was based on £1.5 billion from the back-loaded better care fund and £2 billion from the social care precept, but when we look at those figures closely, we see that the £2 billion was simply rounded up from the Department’s estimate that £1.8 billion would be raised from the precept. The Government had casually added an extra £200 million. That assumption was based on every council’s raising the precept by the full amount, but we already know that not all councils will do so.

When we look even more closely at the detail, we see that it also builds in the assumption that an additional 1.45 million households will be paying council tax. Ministers seem to have disowned the ambition of the previous Housing Minister—the current Minister for Policing and the Fire Service—to build a million new homes by 2020, so I have no idea where the Government plucked that 1.45 million figure from. Perhaps the right hon. Member for Welwyn Hatfield (Grant Shapps) would be tempted to call this another case of “spinning the numbers”. The truth is that the additional funding that the Government claim to be putting into social care is far from guaranteed, and, in any event, unless they find genuinely new money, there will still be a very significant funding gap by 2020.

Now let us come to Surrey County Council and the sorry saga of the abandoned 15% council tax referendum. Shortly after the announcement, David Hodge, the council’s leader, revealed that he had already made cuts worth £450 million and explained that he would have to take an axe to services if the extra £60 million that the 15% council tax hike would have raised was not agreed.

One reason why Surrey’s announcement was so striking is that it has been able to increase spending on adult social care by over 34% since 2010-11, whereas some councils have had to decrease it by up to 32% in the same period. In fact, only two of the 152 social care-providing local authorities have been able to increase their spending on social care more than Surrey. If Surrey says that it cannot cope with demand for social care, which council can?

In the most deprived areas of the country, social care spending fell by £65 per person as councils were hit particularly hard by Government funding cuts, but rose by £28 per person in the least deprived areas. The social care precept will only further entrench that inequality. Blackpool, the most deprived unitary authority area in the country, faces a 31% reduction in spending power between 2011 and 2019, whereas Wokingham, the least deprived area, faces only a 4% fall in the same period.

Perhaps Ministers will finally take the opportunity today to enlighten us on what discussions took place between their Department and Surrey County Council, but from the outside it looks like policy making on the hoof: Ministers, embarrassed by one of their own, exposing the fallacy of their argument. They seem to have settled on opening up the business rates retention pilot scheme, but why was Surrey given special access, whereas other local authorities have not been told how they can apply until now?

[John Redwood]

It should be made clear that Wokingham starts £400 a head worse off than the very best-rewarded councils, which is why there has to be a differential rate.

[Mr Thomas]

Let me gently suggest to the right hon. Gentleman that he might like to think about the adequacy of the funding for services that are needed in that area. I suggest that, in that spirit, he might recognise the accuracy of the figures that I have just given.

Local Government Finance Bill

Debate between Gareth Thomas and John Redwood

2nd reading: House of Commons & Carry-over motion: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 23rd January 2017 Commons Chamber

[Mr Thomas]

I do not remember that. Under the previous Labour Government, I remember rural local councils being well funded and able to invest in local services, unlike the position that they face at the moment.

Devolving more financial power to local areas so that public services can be properly funded, with new business activity encouraged and vital infrastructure investment given the go-ahead, is an ambition that we would support, but the detailed implementation of the measures that the Bill paves the way for could make the difficult funding situation facing local government even worse, exacerbate the social care crisis and leave council tax payers having to foot even more of the bill for local services. If the measures are badly introduced, regional inequality could deepen and divisions between areas with a large business community and those with more entrenched barriers to growth might increase. We support the principle of 100% business rate retention, but such a policy needs to be accompanied by a redistribution formula that addresses the divide between those councils that have sizable business rates income and those that do not. It must ensure that no area of England is left behind or worse off than it is now.

[John Redwood]

Has the shadow Minister given any thought to what incentives might work in some Labour council areas where the business rate level is low and there does not seem to be any industrial or jobs growth?

[Mr Thomas]

I have given that some thought. If the right hon. Gentleman is successful in getting on to the Bill Committee, I hope that we can debate such questions a bit more.

The Bill does not answer the many questions that local councils have about how business rate retention will work in practice. In particular, there is no clarity about what additional responsibilities councils will be allocated in return for 100% business rates retention.

The Government’s record on local government will give few people confidence that they are capable of addressing such concerns. Over the past seven years, this Government and their predecessor have taken an axe to local government spending. The people of England have been left paying more council tax for worse local public services. Last month’s local government settlement only brought more of the same: Ministers forcing councils to put up council tax and make more cuts to local services.